NEW YORK, Jan 7 (Reuters) — Oil rose on
Tuesday as frigid weather in North America hurt some refinery
operations and worries grew over Libyan output and fighting in Iraq.

At least five refineries in the U.S. and Canada curtailed supply
after bitterly cold temperatures caused malfunctions and, in a few
cases, full-scale closures.

"The refineries shutting down is the story of the day," said Joseph
Posillico, senior vice president at Jefferies Bache in New York.

Brent crude settled at $107.35, 62 cents higher than Monday, after
settling lower in the previous five sessions, partly aided by a
stronger dollar and higher equity markets. U.S. crude settled at
$93.67, up just over a quarter of a percent.

U.S. RBOB gasoline futures rose 3.45 cents to $2.6805 a gallon.

Crude inventories fell by 7.3 million barrels last week, the
American Petroleum Institute announced Tuesday.

Libya continues to present long term concerns, after the Libyan navy
opened fire on a tanker that approached to load crude at the seized
port of Es Sider. That port, along with several others has been
controlled for several months by protesters demanding more autonomy
from Tripoli.

A group representing the protesters said in a televised announcement
late Tuesday that global oil companies are welcome to buy oil at
this and other ports, and they will insure the safety of the
tankers.

Analysts were pessimistic about the prospect of a further output
recovery after the restart of the major El Sharara oilfield had led
to a drop in prices.

"The market is taking it with a grain of salt that (Libya) can come
through this time," said Gene McGillian, an energy analyst with
Tradition Energy in Stamford, Connecticut.

Production is building up at the 340,000-barrel-per-day (bpd) El
Sharara, which on Tuesday is pumping 277,000 bpd. A return to full
output will more than double Libyan production, which had fallen to
250,000 bpd from 1.4 million bpd in July.

The North Atlantic Come By Chance Refinery in Newfoundland, Canada,
also remained offline because of a local outage, local media
reported. And weather conditions in southern Ontario prompted Shell
Canada to shut one unit at its 75,000-bpd Sarnia refinery for minor
repairs.

The glitches were partly offset by expectations of significantly
reduced demand for transport fuels.

"The cold weather isn't helping crude oil trade higher than people
would think because there are so many cancellations with flights,"
Baruch said.

Temperatures were forecast to return to normal levels in Texas and
North Dakota by Wednesday leading analysts to believe the
interruptions will be brief.

"I haven't seen anything that's going to cause a huge issue for them
coming back online," Posillico said.

VIOLENCE IN IRAQ

Violence in Iraq and the possibility of increased tensions ahead of
parliamentary elections in April have also sparked concern about
supply from one of the Middle East's largest oil producers.

The Iraqi army deployed tanks and artillery around Falluja on
Tuesday, security officials said, as local leaders in the besieged
city urged al Qaeda-linked militants to leave in order to avert an
impending military assault.

(Additional reporting by Alex Lawler in
London and Jacob Gronholt-Pedersen in Singapore; editing by William
Hardy, David Gregorio, Paul Simao and Andrew Hay)